It would not be a far stretch to say that the COVID-19 pandemic has thrown most businesses for a loop. Uncertainty, confusion, and decreased revenues are enough to make any firm feel the pinch. These difficult times have created challenges internally on how to best approach collecting outstanding balances, and we must be cognizant of how our clients feel and their ability to pay those balances in the current climate. In the early days of COVID-19, Blue Door took early action to ensure that we were well positioned with a strong approach to our A/R and A/P. Here are just a few tips to help navigate this new world and keep your business humming along.
Communicate early and create payment plans with clients and vendors
An important first step that Blue Door took was to have an in-depth analysis of our payables and receivables and reach out to all the agencies that we worked with. Any large balances that would have been difficult to pay outright were discussed in order to find an amicable solution for all involved. Often something as simple as proposing a payment plan to spread out smaller payments over a larger amount of time went a long way in easing the pressure faced by businesses. We always kept in mind that all businesses were being affected, and endeavoured to lend a helping hand whenever we could in the hope that we would also be able to receive some help in turn when we needed it.
Take advantage of all government emergency business supports
The Government of Canada is offering numerous financing options to help businesses of all sizes extend their cash flow to get to the other side of this crisis. At Blue Door, we made sure to use every available avenue offered to us. Small to medium sized businesses can benefit from the Canada Emergency Business Account (CEBA), which offers interest-free business loans of up to $40,000 for businesses and non-profits. If your organization requires something more substantial, the government is offering larger business loans through the Business Credit Availability Program (BCAP) which is being administered by the Business Development Bank of Canada (BDC). More details for these programs can be found here.
Plan out your finances and get nimble
Another helpful step Blue Door took was creating a budget and forecasting our monthly finances to see where we stood. Once we had a report of the revenue and expenses that we were expecting to come through on a monthly basis, we went over each in turn to try to find any efficiencies we could. For all of our monthly charges and subscriptions, we contacted the vendor to explain our situation and attempt to negotiate a roll back of our monthly charges to fall in line with our drop in revenue related to the services provided. These steps allowed us greater foresight to see where we stood and what timelines we could succeed with. It was important for us to do everything we could to make the business as nimble as possible during these turbulent times.
Be understanding and empathetic
As we stated at the beginning of this post, all businesses are being affected, so we made every attempt to have a solid foundation of empathy when dealing with A/R and A/P. We thought to ourselves whether it is worth fighting a client to be paid now if it means they will be less likely to want to work with you once the pandemic is over, or even worse, to have that client spreading negative word of mouth throughout the industry about our lack of flexibility. By making use of the government business supports that were on offer, we gain the flexibility to effectively work with our A/R and A/P for the coming months until everyone is able to get back to business as usual. We believe it to be of prime importance to maintain strong business relationships in order to make sure you have business to get back to.
About the Author:
Tim Weinkauf is our Senior Bookkeeper at Blue Door. Tim has worked for over a decade honing his accounting craft with small to medium sized businesses, most of which are involved with the service industry.